The E-Commerce Imperative
Chapter 1
challenges, issues and strategies
• Internet – profoundly change the business world– enabled a new way of conducting commerce
• e-commerce
• Electricity and power motor
• Computer and Internet
• Customer relationship management are – the competitive advantage – the bottom–line for market leadership
of the information age
Customer information is the currency of success in the 21st century marketplace
• Amazon.com– Earth’s biggest bookstore– The real prize
• Earth’s biggest customer database– Not: name, address, balance
– Buying behavior
– Shop the WEB• The place to find anything customers want to buy
online
• Amazon’s customer acquisition technique– Selling product– PlanetAll
• Help 1.5 million members– To keep up important professional and personal contacts– Electronically remind a member of a special occasion
• 15 millions items happen to be a mouse click away
– One stop convenience– Bring buyers, sellers of everything, everywhere
• Business-to-Business marketplace– Establish industrial communities-of-interests– Ariba and Commerce One
• Change from selling procurement software
• To establishing multi-seller, multi-buyer procurement market-places
• Owning the customer, the whole customer, is the ultimate prize of 21st century business
• Economies shift– From producer– To consumer
• The secret is– Customize offerings– One customer at a time
• Seller Beware
• Magic in owning customers– Give them what they want, when and where
they want it
• Key:– Capturing and analyzing info about buying
behavior
• Knowing what the customers want
• Buying experience is nothing less than delight– Providing full spectrum of individualized goods
and service
Concept is simple, implementation is HARD– Internet
• Three pillars of any business transformation– Technology, process and people
• Goal of course:– Understanding how internet changes the world of
business
– E-commerce • is not a single event
• Is a ongoing journey
– Support the complete external business process• Information stage (electronic marketing, networking)
• Negotiation stage (electronic markets)
• The fulfillment (order process, electronic payment)
• Satisfaction stage (after sales supports)
Internet & business landscape
• Industrial age– Automobile, interstate highway
• Information age– Internet
• Eliminates the constraints of time and distance
• Business ubiquity: conduct business everywhere, all the time
• From “The network is the computer”– Sun Microsystems’ slogan
• To “The network is the business”– Company information available worldwide– Business transaction flow friction-free
anywhere, anytime to customers, suppliers, and trading partners
– Information appliances are business touch points
• Cell phone, pagers, palm tops, web TV,…
Power shift to the customers
• Digital economy– IS customer-centric– NOT product centric
• IMB Global service vs. IBM MAPICS
• Company engineers customer processes that delight will win
• Information is power– Authoritarian society
• One-way hierarchical • Info flow down: One to many
– Democracy • Matrix forms of communication• Many to many
– Industrial age• Info flow one way: from producer to customers
– Information age• Internet provide many to many connection
• Turn the produce-customer relationship upside down
• Customer Age– Customer centric– Mass customization (vs. mass production)
• EC is– Reengineering end-to-end customer process
• Complete solution
• Reducing time
• Eliminate steps where possible
• Build consumer communities-of-interest
• Provide full service consumer process
• OR someone else will
• EC is – Reaching out the ultimate consumer
• B2B, B2C
• B2B’s customer– The one who requisitions, received and often recommends
– The one who actually place orders (the purchasing agent)
• Ultimate customer: the only who recommend
Global sales channel
• NO geographic market territories• Global potential and perspective
– The net levels the playing field– Daunting task
• Multiple languages, legal systems and business cultures
• French ban yahoo.com auction
– Expect new entrants from anywhere, anytime– Never rest to compete in the global marketplace
Reduced the cost of buying and selling
• Company MUST take this opportunity or find itself at a significant competitive disadvantage– Dell vs. Compaq, ….– Variable cost are near ZERO– Potential customers are tremendous– Initial cost is high– Printing and distribution cost are nil
• Direct online sales– Simple (see-buy-get)
• Book
– Complex (see-configure-negotiate-contract-fulfill-settle)
• Dell, Cisco
• Direct online sale dramatically “TURN” physical inventory– Dell
• 1993, sales (2.9 billions) inventory (220 million)
• 1997, sales (12.3 billions) inventory (233 million)– 8 days of inventory
• 2000, 5 days
• Aiming for HOURS instead of DAYS
– Wal-Mart• Just in time inventory
– Outsourcing inventory control directly to its major suppliers in real-time
Converging touch points
• E-Commerce applications and systems must be available regardless of device or location– Web browser– Customers, suppliers, trading partners’ touch
points– Mobile workforce
– Integrate• Telephone
• Call centers
• Palm top, lap top, cell phone, PDA, fax, pager, IP telephone, email, digital postal mail, kiosk
– Digital touch points create new sources of customer information
• Analyze buying behavior
• Customize offering to individual
Always open for business
• A web site follows the sun, greeting markets as they arise each day– Demands non-stop systems and network assets– Redundancy, scalability, and fail-safe
• The good news:– “digital sales staff” work around the clock
without demanding overtime
• The sobering news:– E-commerce systems require availability and
reliability that can be achieved only through much effort and investment
• Reliability– eBay outage
• 1999, lost 3 – 5 millions revenues in the second quarter
• Scalability– “stampedes” with breaking news– Speed is important
• Online shoppers would wait for 8 seconds for a site to download
• Slow securities-trading site (Trade stocks)
Reduced Time-to-Market
• Time-to-market – No longer a competitive advantage
– A competitive necessity
• Microsoft– Beta version
– Reach market before release
– Customers actually involved in product development
– Customers prefer what they already known
• Time-to-market can and must be successfully managed– Collaborative product development– Knowledge sharing
Enriched buying experience
• Multimedia presentation of products– Fit an outfit at Lands’ End.com
• Tools assist customers in buying process– Dell.com help you configure a computer
• Chat room– Customer to share their product and service exp
erience• Potential buyer can learn
• Specialty goods– Purchase decision have many dimension
– Involve multi-step process
– Community-of-interest
• 大學招生、遊學、留學
• B2B: Sharing– product specification– bill of material– product scheduling
across suppliers and trading partners in real-time to increase productivity in design, development, and procurement
Customization
• Cornerstone for building a customer-centric business
• Interacts electronically with customers– Buying behavior can be analyzed to customize– One-to-one marketing revolution
• Find solution better fit their need
• Saving time in searching– Never presenting a huge catalog
– Greater relationship• Business know what customer will buy• Cross selling
– Harvard Business School 入學許可, 豪華學生宿舍• Up-selling
– New computer game, luxury video card
• Demographics• Biographics: long term interests of the indiv
idual
Self service
• Customer service with greater satisfaction and reduced cost
• Frustrated customers– Navigate call center
– Intolerable on-hold
– A human abruptly told you to call another number
• Customer will go to the self-service lane on the information highway
Reduced barriers of market entry
• A benefit and a cause of concern• New entrants can be successful
– Discover and delivery value to customer• Hotmail.com
– Reaches 1,000,000 members in 6 month with 50k budget– Reaches 12M in one years
– Competitors and replication is sure to follow
• Requires constant stream of innovation to sustain competitive advantages
Demographics of the internet users
• Information about income, sex, age and geographic– Early users
• Young, male, educated
– Now• Information appliance
• More normative
• Electronic market is much smaller than total consumer market– Not even closer to critical mass– Bandwidth demographic
• Business
• Individual bandwidth demographic– Keep it simple and snappy
– Track bandwidth trend
Power shift to Communities-of-Interest
• Customers go communities-of-interest first to explore and discover solution– Yahoo! Chat room vs. U.S. stock trading
• People having common interest go to share ideas, information, and opinions
• Customer pull info instead of marketing push
• Industrial age– Labor union
• Information age– Consumer union
• Consumers go there first to discover and explore solution
Cybermediation
• The middleman is dead, long live the middleman.
• Cybermediaries can provide compelling values– Aggregating many and diverse resources aroun
d a complete solution via internet
– An airline ticket is not a vacation• Focus on the bundles of solutions
– Customers needs and requirement
• Look for ways to aggregate value– Industry portal
Logistics and Physical Distribution
• Physical aspect of doing business– Often forgotten component in e-commerce
discussion
• Time value for info– Internet: ability to move info around the world
at the speed of light
• Time value of product– Physical distribution channel
• Warehouse of info age– Not a holding bin– An assembly plant
• Fedex: Flying warehouse
• Factory of the future– Amazon.com take over Fedex?– Fedex take over Amazon.com?
Branding
• Loyalty and acceptance still have to be EARNED– Enter a credit card number at the “BEST” price
site???– First on the net
• Brand name on the net
– Building loyalty and ultimate trust• Convenient, cost-effective, informative, simple,
secure, and reliable
When most market behave like the stock market
• Death of fixed pricing– Coca cola test price base on weather
• The reality of internet pricing: dynamics– Real-time and global– Interactive and close to perfect info
• Internet buying decision– Price, availability, perceive quality, and service
Auction everywhere
• Liquidate surplus goods– Last minute deal and bargains for unsold media
time• Priceline.com: excessive airline capacity
• Help company set price on first run goods– Fixed price will fade in the digital economy
Hyper-efficiency
• BPR, business process reengineering– Internal efficiency
• Internet streamline business processes– Hyper-efficient supply chains– Value chains of information
Conclusions
• Manager must know the “look and feel” of – Digital economy– New infrastructure– New way of conducting business and
competing– New business models– New rule of competition
• Internet– Is NOT a competitive advantage– Is a NECESSITY
Homework 1
• Pick an Internet phenomenon which attract you most– Find an example from .tw country domain– Write an one page report
• Describe the e-commerce site
• The upside of the e-commerce site
• The downside of the e-commerce site
– upload your report to cu.nsysu.edu.tw